By Mark Ford

Volatility in the price of commodities and other items is behind a sharp increase in the cancellation of import letters of credit (L/Cs) in Bangladesh.

According to reports from Bangladesh Bank (BB), more disagreements between importers and exporters have also increased the cancellation rate.

Faults and loopholes

According to BB data, L/C cancellations increased by 26.44 per cent in the fiscal year ending 30 June 2012.

Most of the L/C cancellations were due to what a BB executive director described to local media as "faulty agreements and loopholes in conditions agreed upon by the buyers and the sellers."

Sharp increase

Import L/Cs worth US$2558.42 million were cancelled in the fiscal year ending 30 June 2012, according to BB data.

This compares with similar cancellations worth US$1881.88 million in the previous fiscal year.

Cancellations

Import L/Cs for industrial raw materials worth US$1164.91 million were cancelled in the fiscal year ending 30 June 2012.

Smaller values of L/C cancellations were reported for consumer goods and capital equipment in the same period.

The value of import L/Cs cancelled in those areas is put at US$256.93 million and US$205.81 million respectively.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.